CMS pre­scribes pay­ment fix to re­sus­ci­tate US an­tibi­ot­ic in­dus­try

As the UK ex­per­i­ments with a sub­scrip­tion-style pay­ment sys­tem to re­sus­ci­tate the fledg­ling an­tibi­ot­ic in­dus­try — in the Unit­ed States, the Cen­ters for Medicare & Med­ic­aid Ser­vices (CMS) is work­ing on re­struc­tur­ing the pay­ment ap­pa­ra­tus for new an­tibi­otics to re­vi­tal­ize an­timi­cro­bial de­vel­op­ment and res­cue ex­ist­ing man­u­fac­tur­ers.

For one of the biggest threats to glob­al health, the li­on’s share of an­tibi­ot­ic de­vel­op­ment is tak­ing place in a hand­ful of labs of small bio­phar­ma com­pa­nies as a ma­jor­i­ty of their larg­er coun­ter­parts fo­cus on more lu­cra­tive en­deav­ors. In re­cent months, a hand­ful of an­tibi­ot­ic de­vel­op­ers — in­clud­ing Achao­gen and Tetraphase — have seen their val­ue go up in smoke as fee­ble sales frus­trate growth.

It is no se­cret that the in­dus­try play­ers con­tribut­ing to the ar­se­nal of an­timi­cro­bials are fast dwin­dling. Drug­mak­ers are en­ticed by green­er pas­tures, com­pared to the long, ar­du­ous and ex­pen­sive path to an­tibi­ot­ic ap­proval that of­fers lit­tle fi­nan­cial gain as treat­ments must be priced cheap­ly, and of­ten lose po­ten­cy over time as mi­crobes grow re­sis­tant to them. Con­se­quent­ly, there have been no new class of an­tibi­otics ap­proved since the 1980s — and to­day, rough­ly 700,000 deaths an­nu­al­ly are at­trib­uted to drug-re­sis­tant bac­te­ria, ac­cord­ing to the WHO.

Medicare ben­e­fi­cia­ries ac­count for the ma­jor­i­ty of both new an­timi­cro­bial re­sis­tance (AMR) cas­es and fa­tal­i­ties in the Unit­ed States, CMS ad­min­is­tra­tor Seema Ver­ma not­ed in the jour­nal Health Af­fairs on Fri­day.

In the Unit­ed States, in­cen­tives are al­ready in place to push drug­mak­ers to de­vel­op an­tibi­otics, such as fund­ing sup­port through the Bio­med­ical Ad­vanced Re­search and De­vel­op­ment Au­thor­i­ty (BAR­DA) and reg­u­la­to­ry re­forms such as the Lim­it­ed Pop­u­la­tion Path­way for An­tibac­te­r­i­al and An­ti­fun­gal Drugs (LPAD)  — but the in­dus­try is clam­or­ing for the pas­sage of “pull in­cen­tives,” or pol­i­cy mea­sures to in­crease the val­ue of a mar­ket­ed an­tibi­ot­ic by re­ward­ing drug­mak­ers on­ly af­ter their an­tibi­ot­ic is ap­proved.

Ex­ist­ing in­cen­tives, “while well-in­ten­tioned…ap­pear to have been in­suf­fi­cient, as they fo­cused ex­clu­sive­ly on bol­ster­ing the de­vel­op­ment pipeline with­out re­mov­ing the block­age cre­at­ed by is­sues with pay­ment,” Ver­ma con­ced­ed.

To rem­e­dy the ex­ist­ing set of “mis­aligned in­cen­tives,” the CMS has fi­nal­ized new rules to re­form an­tibi­ot­ic pay­ments from 2020.

Un­der the cur­rent sys­tem, hos­pi­tals bun­dle to­geth­er the costs of all the ser­vices for a giv­en di­ag­no­sis in­to what is called a di­ag­no­sis-re­lat­ed group (DRG). Con­gress im­ple­ment­ed the DRG sys­tem in 1983 to con­trol hos­pi­tal re­im­burse­ments by re­plac­ing ret­ro­spec­tive pay­ments with prospec­tive pay­ments for hos­pi­tal charges. The CMS as­signs each DRG a weight, which in con­junc­tion with hos­pi­tal-spe­cif­ic da­ta, is used to de­ter­mine re­im­burse­ment.

This sys­tem tends to in­cen­tivize hos­pi­tals to pre­scribe cheap­er, gener­ic an­tibi­otics that are not en­gi­neered to tack­le drug-re­sis­tant in­fec­tions. “This, cou­pled with the com­par­a­tive­ly low­er rev­enue ceil­ing for an­tibi­otics due to their low pre­scrip­tion vol­umes, has caused new an­tibi­otics to be­come en­dan­gered in­no­va­tions,” she wrote.

CMS is, there­fore, chang­ing the sever­i­ty lev­el des­ig­na­tion from non-CC to CC for codes spec­i­fy­ing AMR — the “CC” des­ig­na­tion in­di­cates the pres­ence of a com­pli­ca­tion or co­mor­bid­i­ty in a giv­en in­pa­tient case that re­quires the hos­pi­tal to ded­i­cate more re­sources for the care of that pa­tient than typ­i­cal­ly re­quired for the spe­cif­ic di­ag­no­sis. Clas­si­fy­ing drug re­sis­tance in this way will com­pel high­er pay­ments to hos­pi­tals treat­ing pa­tients with AMR, craft­ing a path­way for doc­tors to pre­scribe ap­pro­pri­ate new an­tibi­otics with­out dis­rupt­ing hos­pi­tal bud­gets. CMS will al­so con­tin­ue to “ex­plore whether ad­di­tion­al re­forms are need­ed to re­cal­i­brate DRGs to bet­ter ac­count for the clin­i­cal com­plex­i­ty of drug re­sis­tance,” Ver­ma said.

An­oth­er mea­sure be­ing tak­en by the CMS is to amend the New Tech­nol­o­gy Add-On Pay­ments (NTAPs) sys­tem as it re­lates to AMR, which is “unique­ly di­min­ished for an­tibi­otics.” NTAP was cre­at­ed in 2000 as a “time-lim­it­ed en­hanced pay­ment for new drugs or de­vices” to smooth the en­try for fresh prod­ucts while pro­vid­ing time for the rel­e­vant DRG to re­cal­i­brate to ac­com­mo­date pay­ment for new prod­ucts. “How­ev­er, stake­hold­er feed­back near­ly two decades lat­er sug­gests that im­ple­men­ta­tion of the NTAP through rule­mak­ing by CMS — both in terms of el­i­gi­bil­i­ty cri­te­ria and pay­ment — is in­suf­fi­cient to sup­port in­no­va­tion for an­tibi­otics,” Ver­ma ac­knowl­edged.

This is part­ly due to the fact that an­tibi­ot­ic de­vel­op­ers strug­gle to meet the agency’s “sub­stan­tial clin­i­cal im­prove­ment” cri­te­ria as they are tra­di­tion­al­ly giv­en the green light by the FDA on the ba­sis of tri­als that show their prod­ucts are non-in­fe­ri­or to ex­ist­ing an­tibi­otics. “(H)alf of pre­vi­ous an­tibi­ot­ic ap­pli­ca­tions for NTAPs have been re­ject­ed be­cause of a fail­ure to sat­is­fy this spe­cif­ic cri­te­ri­on,” Ver­ma said.

An­oth­er is­sue is that the pay­ment lev­el for the NTAP is set at 50% of ei­ther the cost of the new prod­uct or the dif­fer­ence be­tween the DRG pay­ment and the to­tal cov­ered cost of the par­tic­u­lar case. How­ev­er, this thresh­old is in­suf­fi­cient to in­cen­tivize hos­pi­tals to file for an NTAP pay­ment due to the low an­tibi­ot­ic pre­scrip­tion vol­umes for re­sis­tant in­fec­tions.

To rem­e­dy these struc­tur­al chal­lenges, the CMS — the Unit­ed States’ largest pay­er — has fi­nal­ized an al­ter­na­tive NTAP path­way that does not in­clude the SCI cri­te­ria and in­creas­es the NTAP from 75% from 50% for new an­tibi­otics that have been grant­ed as Qual­i­fied In­fec­tious Dis­ease Prod­uct (QIDP) sta­tus.

Last year, for­mer FDA com­mis­sion­er Scott Got­tlieb sug­gest­ed a “li­cens­ing mod­el” in which acute care in­sti­tu­tions that pre­scribe an­timi­cro­bial med­i­cines would pay a fixed li­cens­ing fee for ac­cess to these drugs, grant­i­ng them the right to use a cer­tain num­ber of an­nu­al dos­es.

A New Fron­tier: The In­ner Ear

What happens when a successful biotech venture capitalist is unexpectedly diagnosed with a chronic, life-disrupting vertigo disorder? Innovation in neurotology.

That venture capitalist was Jay Lichter, Ph.D., and after learning there was no FDA-approved drug treatment for his condition, Ménière’s disease, he decided to create a company to bring drug development to neurotology. Otonomy was founded in 2008 and is dedicated to finding new drug treatments for the hugely underserved community living with balance and hearing disorders. Helping patients like Jay has been the driving force behind Otonomy, a company heading into a transformative 2020 with three clinical trial readouts: Phase 3 in Ménière’s disease, Phase 2 in tinnitus, and Phase 1/2 in hearing loss. These catalysts, together with others in the field, highlight the emerging opportunity in neurotology.
Otonomy is leading the way in neurotology
Neurotology, or the treatment of inner ear neurological disorders, is a large and untapped market for drug developers: one in eight individuals in the U.S. have moderate-to-severe hearing loss, tinnitus or vertigo disorders such as Ménière’s disease.1 With no FDA-approved drug treatments available for these conditions, the burden on patients—including social anxiety, lower quality of life, reduced work productivity, and higher rates of depression—can be significant.2, 3, 4

Af­ter 4 years of furor, the FTC and New York state ac­cuse Mar­tin Shkre­li of run­ning a drug mo­nop­oly. And this time they plan to squash it

Pharma bro Martin Shkreli was jailed, publicly pilloried and forced to confront some lawmakers in Washington riled by his move to take an old generic and move the price from $17.50 per pill to $750. But through 4 years of controversy and public revulsion, his company never backed away from the price — left uncontrolled by a laissez faire federal policy on a drug’s cost.

Now the FTC and the state of New York plan to pry his fingers off the drug once and for all and open it up to some cheap competition.

Patrik Jonsson, the president of Lilly Bio-Medicines

Who knew? Der­mi­ra’s board kept watch as its stock price tracked Eli Lil­ly’s se­cret bid­ding on a $1.1B buy­out

In just 8 days, from December 6 to December 14, the stock jumped from $7.88 to $12.70 — just under the initial $13 bid. There was no hard news about the company that would explain a rise like that tracking closely to the bid offer, raising the obvious question of whether insider info has leaked out to traders.

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Short at­tack­er Sahm Ad­ran­gi draws crosshairs over a fa­vorite of Sanofi’s new CEO — with PhII da­ta loom­ing

Sahm Adrang Kerrisdale

Kerrisdale chief Sahm Adrangi took a lengthy break from his series of biotech short attacks after his chief analyst in the field pulled up stakes and went solo. But he’s making a return to drug development this morning, drawing crosshairs over a company that’s one of new Sanofi CEO Paul Hudson’s favorite collaborators.

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UP­DAT­ED: Ac­celeron of­fers thumbs up on a PhII suc­cess for would-be block­buster drug — and shares rock­et up

There’s no public data yet, but Acceleron $XLRN says that its first major trial readout of 2020 is a success.

In a Phase II study of 106 patients with pulmonary arterial hypertension (PAH), Acceleron’s experimental drug sotatercept hit its primary endpoint: a significant reduction in pulmonary vascular resistance. The drug also met three different secondary endpoints, including the 6-minute walking test.

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Civi­ca and Blue Cross Blue Shield launch new ven­ture to low­er gener­ic prices

Five years after Martin Shkreli put a smug face to the volatile prices companies can charge even for generic drugs, payers and governments are coming up with outside-the-box solutions.

The latest fix is a new venture from the Blue Cross Blue Shield Association, 18 of its members and Civica, the generics company founded in 2018 by hospitals fed up with high prices for drugs that had long-since lost patent protection. While Civica focused on drugs that hospitals purchased, the new company will aim to lower prices on drugs that, like Shkreli’s Daraprim, are purchased by individuals.

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Merck Invests in State-Of-The-Art Biotech Development Facility in Switzerland

Mer­ck KGaA match­es lofty R&D goals with €250M in­vest­ment in­to a new clin­i­cal man­u­fac­tur­ing site in Switzer­land

As Merck KGaA strives to prove itself as a capable biopharma R&D player, it has begun construction on a €250 million facility dedicated to developing and manufacturing drugs for use in clinical trials.

The German drugmaker chose a location at Corsier-sur-Vevey, Switzerland, where it already has a commercial manufacturing site, in order to “bridge together research and manufacturing.”

“This investment in the Merck Biotech Development Center reflects our commitment to speed up the availability of new medicines for patients in need, and confirms the importance of Switzerland as our prime hub for the manufacturing of biotech medicines,” CEO Stefan Oschmann said at the groundbreaking ceremony, according to a statement.

Breast can­cer ap­proval in tow, As­traZeneca, Dai­ichi armed an­ti­body scores in key gas­tric can­cer study

AstraZeneca kicked off Monday with a flurry of good news. Apart from unveiling positive results on its stroke trial testing its clot-fighter Brilinta, and welcoming its experimental IL-23 inhibitor brazikumab back from Allergan — the British drugmaker also disclosed some upbeat gastric cancer data on its HER2-positive oncology therapy it is collaborating on with Daiichi Sankyo.

Buoyed by the performance of its oncology drugs, last March AstraZeneca chief Pascal Soriot bet big to partner with Daiichi on the cancer drug, with $1.35 billion upfront in a deal worth up to roughly $7 billion. Roughly 8 months later, as 2019 drew to a close, the FDA swiftly approved the drug — trastuzumab deruxtecan — for use in breast cancer, months ahead of the expected decision date.

Sor­ren­to shrugs off an anony­mous pri­vate eq­ui­ty group’s $1B of­fer to buy the com­pa­ny

San Diego-based Sorrento Therapeutics isn’t going the M&A route — at least not today.

The biotech caused quite a stir when it put out word a few weeks ago that an unidentified private equity group was bidding a billion dollars-plus for the company. The news drove a quick spike in the company’s share price as investors hooked up for the ride — that didn’t happen.

The update sparked a 5% drop in the share price $SRNE ahead of the bell. It’s now trading just above $4, without any evidence that the $7 price looked like it was firm.